R&D Tax Relief for Life Sciences Companies: What Qualifies

Few sectors are a more natural fit for R&D tax relief for life sciences than biotech, pharma and medtech — the work is R&D almost by definition. But it's also one of the areas HMRC scrutinises most carefully, because not everything that happens in a lab or a clinical trial counts as R&D for tax purposes. Getting the boundary right is the difference between a robust claim and one that unravels under enquiry.

This guide sets out what qualifies for life sciences companies, the costs you can claim (including clinical trial payments), why so many life sciences firms are a strong fit for the more generous ERIS scheme, and where HMRC draws the line.

What counts as R&D in life sciences

The tax definition is the same across every sector: a project qualifies only if it seeks an advance in science or technology by resolving scientific or technological uncertainty that a competent professional couldn't readily resolve (CIRD81900).

HMRC publishes life-sciences-specific guidance too. CIRD81920 applies the R&D definition to pharmaceuticals, walking through the stages of drug development — discovery, preclinical, and clinical development. The key principle throughout: the activity must be resolving genuine scientific uncertainty, not confirming a result that is already substantially known.

For the underlying tests, see our guides to qualifying R&D activities and evidencing scientific uncertainty.

Life sciences projects that typically qualify

• Drug discovery — identifying and synthesising new chemical or biological entities, with biological testing and toxicology.
• Preclinical development — in-vitro and in-vivo work developing candidate compounds where the outcome is genuinely uncertain.
• Novel formulation and delivery — developing a formulation, delivery mechanism or manufacturing route that isn't readily deducible.
• Novel assays, biomarkers and analytical methods — developing a new way to measure or detect an outcome where no established method exists.
• Medical device and diagnostic development — resolving technological uncertainty in devices, diagnostics or lab equipment.
• Bioprocess development — developing or scaling a biological production process where the scale-up itself creates uncertainty.
• Early-phase clinical trials — Phase I and early Phase II work is more likely to qualify where it resolves genuine scientific uncertainty.

What HMRC will challenge

Life sciences claims fail most often at this boundary, so be clear about what usually doesn't qualify:

• Routine regulatory testing carried out to satisfy MHRA or EMA requirements where the scientific outcome is substantially known.
• Later-stage confirmatory trials designed to confirm known results for a regulatory filing, rather than resolve uncertainty.
• Manufacturing scale-up once the process is established.
• Routine data collection and administration during a trial.

The test is always the same: is this activity resolving a scientific uncertainty a competent professional couldn't readily overcome? Developing a novel assay to measure trial outcomes can qualify; running the trial purely to tick a regulatory box usually doesn't.

Which costs you can claim

For a qualifying project, you claim an apportioned share of:

• Staff costs — scientists, technicians and clinical staff doing or directly supporting the R&D.
• Subcontractors and externally provided workers — including CROs (contract research organisations). Watch the overseas restriction: under the merged scheme (accounting periods beginning on or after 1 April 2024), subcontractor and EPW costs are generally restricted to work performed in the UK, with limited exceptions where the conditions or specialist facilities genuinely don't exist here. This matters for life sciences, which often runs trials and lab work overseas — see our note on subcontracted R&D under the merged scheme.
• Consumables — reagents, compounds, materials and utilities consumed in the R&D.
• Clinical trial volunteer payments — payments to trial volunteers (honoraria, travel, compensation for time) are a qualifying category, per CIRD84400.
• Software and data used directly in the R&D.

Why life sciences companies are often a strong fit for ERIS

For accounting periods beginning on or after 1 April 2024, most companies claim under the merged R&D scheme — a 20% above-the-line expenditure credit on qualifying costs (taxable).

But life sciences is the classic case for the Enhanced R&D Intensive Scheme (ERIS). Many biotech and pharma companies are loss-making and highly R&D-intensive — R&D is most of what they spend. Where qualifying R&D is at least 30% of total relevant expenditure (CIRD123000), a loss-making SME can claim the more generous ERIS payable credit. A pre-revenue biotech burning almost entirely on research will usually clear that threshold comfortably — so checking your R&D intensity is essential before defaulting to the merged scheme. Our guides to ERIS eligibility and the 30% intensity condition set out the detail.

Making a life sciences claim that survives HMRC

With HMRC checking around one in five R&D claims, evidence and boundary-setting are everything:

1. Define the R&D boundary precisely. Separate the genuine uncertainty-resolving science from routine regulatory, manufacturing and administrative activity — this is exactly where HMRC probes life sciences claims.
2. Keep contemporaneous records — experimental protocols, results, failed hypotheses, and staff time linked to the R&D.
3. Complete the Additional Information Form — every claim needs a completed AIF with a technical narrative and cost breakdown, filed before or with your CT600.
4. Get the overseas position right — identify which subcontractor/CRO costs are UK-based and whether any overseas work meets the narrow exemption.

The same principles apply across sectors — see our companion guides for engineering firms and software & SaaS companies.

Frequently Asked Questions

Do life sciences and biotech companies qualify for R&D tax relief?

Almost always, where the work resolves genuine scientific uncertainty — drug discovery, preclinical development, novel formulations, new assays, medical devices and early-phase trials commonly qualify. Routine regulatory testing and confirmatory later-stage trials usually don't. See our pharma-sector R&D case studies for worked examples.

Do clinical trials qualify for R&D tax relief?

Some do. Early-phase trials (Phase I and early Phase II) resolving genuine scientific uncertainty are more likely to qualify; later-stage trials run to confirm known results for regulatory approval generally don't. Payments to clinical trial volunteers are a qualifying cost (CIRD84400).

Can we claim R&D costs for work done overseas?

Under the merged scheme (from 1 April 2024), subcontractor and externally provided worker costs are generally restricted to work carried out in the UK, with narrow exceptions where the conditions or specialist facilities genuinely don't exist here. This is a key issue for life sciences companies using overseas CROs or trial sites.

Which scheme is best for a loss-making biotech?

Often ERIS. Loss-making SMEs whose qualifying R&D is at least 30% of total expenditure can claim the more generous Enhanced R&D Intensive Scheme — a threshold most research-heavy biotechs clear. Otherwise, the merged scheme's 20% expenditure credit applies.